eBay owned PayPal has been making some interesting acquisitions over the past few months that clearly show the direction of the company in capturing payments flow from digital goods, and physical products at a local level. The company bought local payments and advertising company Where for over $100 million in April, snapped up mobile payments company Fig Card and most recently shelled out $240 million for mobile payments company Zong. The payments giant is clearly serious about mobile and local payments and is buying its way into commanding the space. In terms of future strategy, PayPal believes that by 2015 digital currency will be accepted everywhere in the U.S., from local businesses to large chains.
Of course, this ambitious goal is easier said than done. Considering that PayPal is a digital product and doesn’t have built in reach to local businesses with point of sale systems, scaling to the local level is going to take a significant amount of work. We were able to chat with Sam Shrauger, VP of global product and strategy for PayPal about the company’s future strategy to dominate the ‘digital wallet.’
Shrauger tells us that PayPal’s plan is less about making the wallet digital and more about letting people take advantage of technology to use money better. As for making this a reality, Shrauger says that letting people use PayPal in the physical world is critical for the payments technology.
He explains that innovating in the payments space in the physical world is about giving customers mor options to pay, as opposed to offering a single technology. PayPal wants to add more ways your money can work for you, beyond just the payment itself. As for what that means, Shrauger declined the reveal the company’s plans but did say that PayPal would be launching new products later this year dealing with this issue.
There are two advantates PayPal has in its favor. First, the company now has over 100 million active users, which is impressive. And second, the company’s userbase is increasingly using mobile devices to pay for products. PayPal recently announced that it was upping the estimates of the amount of mobile payments transactions using the technology this year; doubling the estimate to $3 billion in mobile total payments volume (TPV) in 2011.
Payments in the physical world is going to be a big step for PayPal and I’m very curious how the company is planning to use its technology in this expansion. For Google, NFC and mobile phones are part of the gateway for payments in local, with the launch of Google Wallet. For Square, small businesses popularity and ease of use have been helping the mobile payments startup grow like crazy.
It’s not the first time I’ve pointed out that PayPal has an ambitious plan on its hands by becoming the digital wallet. And it should be interesting to see what killer technology the company has up its sleeve later this year.
Check out this video below in which PayPal President Scott Thompson challenges his employees to use only digital currency to pay for all of their purchases.
EBay is getting more serious with its mobile payments ambitions with PayPal, announcing today that it is buying Zong for $240 million in cash. The move bolsters PayPal’s existing payment system and allows it to offer users an additional way to pay via carrier billing. Mobile payments are a vast and growing opportunity for PayPal, which has built its business off mostly online transactions and person-to-person payments but is increasingly looking to enable payments by phone.
Zong, which was backed by Matrix Partners, Advent Venture Partners and Newbury Ventures, works with 250 carriers around the world to enable transactions that are placed on an operator bill. The systems is used to facilitate payments for digital goods and services in 45 countries.
The pickup signals how PayPal is bulking up to take on the mobile payments market. It recently said it expects to do $3 billion in mobile transactions this year and has hit 100 million accounts. It said it has more than 8 million customers making purchases on their mobile phones through PayPal, with $10 million in mobile payments a day.
“Commerce is changing. With mobile phones, we walk around with a mall in our pockets. PayPal helps to make money work better for customers in this new commerce reality — no matter how they want to pay or what device they’re using,” said Scott Thompson, president of PayPal. “We believe that Zong will strengthen this value by helping us reach the more than 4 billion people who have mobile phones, giving them more choice and security when they pay.”
EBay has been on a buying spree as it sharpens its mobile and local ambitions. It recently bought Magento to launch to a commerce platform. And it previously bought WHERE, GSI, RedLaser, Milo and others to help the company move into local commerce. It shows that e-commerce is increasingly turning into mobile commerce and that the big opportunity is in tying together online and offline actions and purchases. While online commerce is big, the larger market by far is real-world transactions. Those are increasingly influenced by smartphone-wielding consumers, and now the next step is to facilitate more transactions through the phone. It’s a market that Google, Square, the carriers and a host of others are vying for.
The purchase of Zong suggests that we’ll see more acquisitions and mergers as the mobile payments market heats up. Juniper Research just predicted that mobile payments will be a $670 billion market by 2015. Others competitors like Boku could be ripe for acquisitions as companies look to prepare for the boom in mobile payments. The Zong acquisition is expected to close in the third quarter of this year.
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